Comments

The reason why rates were high in Italy, Spain and such countries had nothing to do with the economic potential of those states, but the fact that their currency was controlled by the ECB, which behaved as a complete rogue until Draghi came along. Read more

Everyone understands the justification for investments with a positive return. We do not need to hear over and over again why this is good. The reason we are not allowing government to make investment today is because many believe they are not capable of actually making investments with a positive return. The fact that the interstate highway system produced a positive return in 1950, does not mean that building another one would double that return today. In fact, such an investment would be outrageously counterproductive, not just neutral.If the author (and Krugman, Stiglitz, Summers etc) want to justify new investment, why not suggest some mechanism to ensure its productivity, rather than just argue that "rates are so low it's just gotta be good". This kind of justification usually leads to truly stupid investments and bubbles, but seems to be all we ever hear. Enough hand waving already.Read more

If the funding for infrastructure do not have to be paid for by the populace, it is a grand idea, but if on the other hand if that would have to be paid for eventually by the same populace it would tantamount to postponement of some consumption already happening. How will it add to the GDP therefore? Read more

To the many who see government spending on infrastructure as a silver bullet for the economy and as a job creator I would like to raise a word of caution, It may be time for a "truth off'. More "bridges to nowhere" and wasted spending exist then the taxpayer could ever imagine. Often this spending falls short of creating real wealth for our country.

Where I live we recently replaced a major bridge that even the city's leading newspaper said did not need replacing. The newspaper had gone on to state the bridge did not "need" to be replaced, but only needed minor repairs. In the end, they did not only replace the bridge but built a "super bridge" wasting a huge amount of money doing it. The article below is titled, "Infrastructure Spending No Silver Bullet", it explores this subject in more detail.

http://brucewilds.blogspot.com/2014/02/infrastructure-spending-no-silver-bullet.html Read more

Yes, of course we the US (& Europe - if only peace could break out between the ECB and the Bundesbank) should be expanding fiscal policy, in response to the new fiscal and monetary reality. This is what our central bankers are trying to telling us - the Fed, the ECB, the BoE, the IMF (they can't raise their eyebrows any higher). The problem we are facing is a private debt overhang, not sovereign debt. Is there nothing worth spending for? We don't need to build more railroads, perhaps, or maybe we do, but improving healthcare and education and other public services and buying up student debt and private mortgage debt would go a long way to encouraging the acceleration of private debt creation, which is the key coefficient of growth. And an ambitious new deal for green energy might just save the planet (from the greenhouse effect and secular stagnation both) as well as crowding-in private investment (remember what that was?). Sovereign currency governments are not 'disciplined or indisciplined investors' depending on the 'return' they get in terms of a reduction in sovereign debt. The return is entirely in the creation of growth in the real economy - the creation of real assets. It is a misconception to think that they need to sell bonds to spend. Let the bank reserves climb to the sky (as they have already done under QE without causing said sky to fall). The limit for spending now is not the nominal debt level or some inevitably arbitrary and notional red-line debt to GDP ratio: it is output capacity. If govt tries to spend more than what the economy has for sale, then we will experience inflation (remember what that was?). Of course that would be a serious problem, but one for which central bankers have the know-how and the tools to deal with: they could (finally!) raise interest rates. And of course government could at that point, in the face of inflationary pressures, spend less and/or tax more, assuming, that is, they are not completely and irredemiably 'undisciplined'. Read more

In 1992 they promised maximum debt levels of 60% of GDP for us to agree on monetary union. In 2012 they promised automatic annual debt reduction of 5% of debt for us to agree on the "ES"M. They promised automatic sanctions for violations of the debt thresholds. As they have promised us so much and as nothing of this has ever materialized any further promises on debt reduction cannot be considered as creditworthy. They should rather be considered as non-existent. What will happen is: they will spend the money now but will never comply with the stability rules. Programs will never be interrupted if bond-market conditions "normalize". The "European" commission will always certify contribution to growth and sustainability no matter the facts (if not they will just say "Oh, it's France"). Apart from that, the miraculously "high demand for government debt securities" of countries with catastrophic debt overload is a fiction created by the "E"CB. What is called "New Fiscal Reality" here is in reality just the corruption of the whole system.

All in all, this piece just rehashes the old ideas of the French elites on economic and monetary policy (i.e. public interventionism and dirigisme financed via the printing press) together with some promises to make them digestible for the Germans (promises that are not intended to be kept as argued above).

But even if the attack on the "SG"P and the common treaties is so blatant and even if the German ideas on economic and monetary policy are so completely different - why should we object to the French ideas? It is eventually their own business and they have to be answerable to the French people for it. The national right of self determination applies to France as to Germany (as to Greece).

We should not object to their ideas - even if they seem wrong from our perspective and contradict the common treaties. We should rather object to the treaties that deny them and us our sovereignty. We should thus appreciate their attack on the treaties. It should be our common interest to cancel the treaties, to leave the currency union and to restore democracy so that they can follow their ideas and we can follow our ideas. Then they can delay structural reforms and instead print French Francs till the cows come home - but have to bear the consequences and devalue against the Deutsche Mark. And they cannot any longer pay for their policy with our money - which in the end amounts to taxation without representation from our perspective. Read more

Governments in both the US and EU would be foolish to not take advantage of these historically low interest rates to finance infrastrcture projects. Secondly, the growth engines of these economies need to be put into high gear. GDP growth in the 1.5 to 2.5 range represents a fundamental problem that reflects economic lethargy. I am not certain how that problem can be resolved without the willingness of individuals to take charge of their destiny. Governments cannot force change upon its citizenry in any sustainable way. The world econmy appears to be lost at sea and without a captain on deck.Read more

Do the following count as infrastructure projects?1. Dulles Transit Extension2. Otay Mesa East Port3. OHare and Laguardia makeoversWhen the main artery (Interstate) connects the surrounding suburbs to the major business district is in disrepair, impacting the daily commute of hundreds of thousands of individuals on a daily basis ( i.e potholes and crumbled concrete strewn about) I define that as an infrastructure issue and when an aging bridge collapses resulting in multiple deaths I call that an infrastructure disaster. Read more

Investment in decarbonising the economy is perfectly suited to current conditions. Both energy efficiency measures and investment in renewable generation are big up-front capital costs which deliver long term streams of reliable energy cost savings, at almost zero risk. We would be crazy not take advantage of this opportunity, but changing expectations of public fiscal policy is a very slow process.

The better alternative is simply for governments to commit up front to a long term model of rising carbon pricing across G20 economies for the next 10 years. This would immediately provide a huge incentive for private investment, but without inflicting high costs immediately.

Conventional economics says that increasing the tax burden detracts from future growth, but the introduction of carbon pricing would actually create the incentives to stimulate investment and employment. As a bonus decarbonising would help re-dress long term imports of fossil fuels, which have contributed to huge imbalances in the Global economy. If the UK were to completely eliminate petroleum and other fossil fuel imports it would actually halve our current account deficit, added to which, Europe could dramatically reduce its dependence on Russian gas and oil. Sounds like a great time to start breaking some outdated economic rules. Read more

We *have to* invest in renewables, whether they make economic sense or not. Because otherwise life on this planet will be miserable in 100 years from now.Price signals cannot be good guides for decisions at that time scale. Read more

PS On Air: The Super Germ Threat

NOV 2, 2016

In the latest edition of PS On
Air
, Jim O’Neill discusses how to beat antimicrobial resistance, which
threatens millions of lives, with Gavekal Dragonomics’ Anatole Kaletsky
and Leonardo Maisano of
Il Sole 24 Ore.

Subscribe to our Newsletter

Subscribe to our Newsletter

Sign up to receive newsletters about what's being discussed on Project Syndicate.

EmailReceive our Sunday newsletterA weekly collection of our most discussed columnsReceive our PS On Point newsletterStay informed of the world's leading opinions on global issues

Why not register an account with us, too? You'll be able to follow individual authors (to receive notifications whenever they publish new articles) and subscribe to more specific, topic-based newsletters.

Project Syndicate provides readers with original, engaging, and thought-provoking commentaries by global leaders and thinkers. By offering incisive perspectives from those who are shaping the world’s economics, politics, science, and culture, Project Syndicate has created an unrivaled global venue for informed public debate.